Turn your mortgage into a tax deduction? | Debt Recycling in Australia
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- čas přidán 15. 08. 2024
- Turning BAD debt into GOOD debt by using your own home and its' debt to then invest in property. We've done this and it works well for us! Drop a like on this video and leave a comment.
P.s. don't mind the background noise from our cheeky greyhound
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Thank you Luke for sharing this valuable information.
Enjoying the content - thank you... I am in the middle of doing this now.
Good stuff and thanks!
You’re talking about debt leveraging not debt recycling ♻️. An e.g., of debt recycling: I have 150k in an offset, and have a 350k PPOR mortgage (which is non deductible). I then split a seperate fixed loan account (with a redraw facility) from the PPOR for 150k. I.e., PPOR (non deductible) is now 200k and the split loan (deductible) is 150k. I deposit 150k from the offset into the split deductible loan- then redraw it and invest in property or shares.
The income generated from investment can pay off the PPOR loan. Income tax is payable on the difference between income from investment and interest from deductible loan. For e.g., if there was a windfall of 8% generated from shares= 12k - 9.34k (interest on deductible loan) around 2.5k would be added to my taxable income.
Remember, the point of debt recycling is NOT to increase debt. The point is to recycle the debt you already have. I.e., for DR to work, one would need a lump sum of cash (not the same as equity in PPOR).
I've done this. But will feel the pinch with the rate rise
If the 100k equity is under the onwer occupier loan but set up in a separate account, can it be used for tax deduction?
Yes - as long as the funds are used for investment purposes
George is cute. Great video. 😁 👍
Didn't the tax law around negative gearing change recently?
Nope not yet
Sorry a dumb question here. What does equity mean in the context of owning a house?
Just my thoughts so happy to hear an alternative but:
Possibly thinking about equity in your house can be thought of as pie. If your pie (house) has gone up in value by 10% then if you were to sell, then you get 10% pie profit.Or even if your place stayed the same value but you have paid 10% that's equity too.But if the equity is 0% and you only paid interest so far or even worse the value reduced by 10% (as happen this year for allot of Aussies) then that's negative equity meaning even if you sold today you would be 10% in debt with your bank and potentially homeless.
It’s the part you own
funny how property is falling now.
Property is still worth significantly more than Jan 2020... even with pullbacks prices are up hundreds of thousands
Good luck to when the next GFC happens.
Diamond hands
And when will that be?
@@bobbobblesworth5634 No one knows and that’s the point, the more risk you gamble, the harder you’ll fall!
@@DANIEL-ls5ku Well said. All this fancy talks about "good debt vs bad debt" totally ignores the fact that any debt could put you in a precarious position if you can't service the repayments.
If you are in a ver strong position (50% or below LVR with cash buffer) it’s a solid strategy. Or you can exercise tax maximisation..
And we wonder why his generation are being shafted. We nedd to have consequences and that means preventing home owners getting access to the aged pension when they have super. Those who have a home and super don't need aged pension. Otherwise we just take from future generations to fatten up old people. These people can do what they want with their paid off home and buy as many investments as they like. But taxpayers wont be g having them aged pension later on....we need threats.
Just noticed this podcast is 2 years old....increasing that Govt and RBA has sideswiped this guy.
There will be a property portfolio update at 10k subscribers :)